1. Chapter IV of Part III of the Convention deals with the passing to the buyer of the risk
of loss of or damage to goods. The first article of the chapter (article 66) states the
consequences for the buyer after such risk passes to the buyer. The following three articles
(articles 67-69) set out rules for when the risk passes to the buyer. The final article of the
chapter (article 70) states the allocation of the risk of loss or damage if the seller commits
a fundamental breach.

2. As a general rule, a seller that satisfies its obligation to deliver goods or documents (see
Section I of Chapter II of Part III (articles 31-34), entitled "Delivery of the goods and
handing over of documents") will cease to bear the risk of loss or damage. The language
used in chapter IV and in articles 31-34 is often identical. One decision therefore concludes
that the same interpretation should be given to the word "carrier" in articles 31 and 67.[1]

3. The rules in chapter IV apply without regard to whether the seller or the buyer owns the
goods.[2] Chapter IV therefore displaces domestic sales law that allocates risk to the
"owner" of the goods, although the outcome may be the same in any particular case under
both the Convention and the domestic law.[3]

4. Chapter IV deals with loss of or damage to the goods sold. This is stated expressly in
the first clause of article 66 and implicitly in the other articles. The loss of goods includes
cases where the goods cannot be found [4], have been stolen, or have been transferred to
another person.[5] Damage to the goods includes total destruction, physical damage,[6]
deterioration,[7] and shrinkage of the goods during carriage or storage.

5. Several courts have applied provisions of Chapter IV to the passing of risks other than
the risk of loss of or damage to goods. These risks include the risk of delay by the carrier
after the seller has handed over the goods to the carrier [8] and the risk that the attribution
of a painting is incorrect.[9]

6. The seller and buyer may agree on when the risk of loss or damage passes to the buyer.
They will frequently do so by expressly incorporating into their agreement trade terms, such
as the International Chamber of Commerce's Incoterms.[10] They may agree to vary a
standard trade term,[11] adopt a trade term that is local,[12] or use a trade term in
connection with the price rather than delivery.[13] The parties may also agree to the
allocation of risk by incorporating the standard terms or general business conditions of the
seller or buyer.[14] In accordance with article 6, the parties' agreement will govern even
if it derogates from the provisions of Chapter IV that would otherwise apply.
Notwithstanding article 6, however, a German court interpreted a trade term set out in a
French seller's general business conditions in accordance with German law because the
seller had used a clause common in German commerce, drafted in the German language,
and the buyer was German.[15]

7. The Convention's rules in article 8 on the interpretation of statements and acts of the
parties apply to agreements relating to risk. Thus, one court found that the parties had
agreed that the seller would deliver the goods at the buyer's place of business because, in
accordance with article 8(2), a reasonable person in the same circumstances as the buyer
would understand use of the German term "frei Haus" ("free delivery") to mean delivery
at the buyer's place of business.[16]

8. Article 9(1) provides that parties are bound by any practices, including those allocating
risk of loss or damage, that they have established between themselves. Courts have
occasionally looked to the prior practices of the parties for evidence of the parties' intent
with respect to risk of loss.[17] One court has concluded, however, that conduct by one
party with respect to risk on two prior occasions is insufficient to establish a binding
practice.[18]

9. The seller and buyer may also be bound by trade usages with respect to risk of loss or
damage. Under article 9(1), they are bound if they agree to a usage, whether international
or local. They are also bound under article 9(2) by widely-observed international usages
which they know or should know unless they agree otherwise. If the parties expressly
incorporate an Incoterm into their contract, article 9(1) makes the definition of the term by
the International Chamber of Commerce binding, but the Incoterms are so widely-used
courts may enforce the ICC's definition of a term even absent express incorporation of
those definitions.[19]

10. Article 66 and the other provisions of Chapter IV are silent on who has the burden of
establishing that the risk of loss or damage has passed to the buyer.[20] One court has
endorsed the view that the burden is on the party that argues that the risk has passed.[21]
The issue of who bears the risk arises, however, in the context of actions to enforce
obligations of the seller (e.g. to deliver conforming goods) or buyer (e.g. to pay for the
goods) under other provisions of the Convention.

11. The cases place the burden upon a seller that brings an action to recover the price in
accordance with article 62. In several cases sellers failed to establish that they had delivered
the goods and therefore the buyers were found not to be obliged to pay. In one case, the
court found that a bill of lading that accurately described the goods sold but did not indicate
the name of the buyer as the recipient was insufficient proof.[22] In a second case, the court
found that a stamped but unsigned receipt was not sufficient proof of delivery at the buyer's
place of business as required by the contract of sale.[23]

12. Where damaged goods are delivered and there is a dispute over whether the damage
occurred before or after the risk of loss passed to the buyer, the buyer has the burden of
establishing that the damage occurred before risk passed to it. Thus, where a seller
produced a bill of lading with the master's annotation "clean on board" and the buyer
produced no evidence that deterioration occurred before the seller handed over the goods
to the carrier, the buyer bore the risk of the deterioration.[24]

13. If the parties agree to terminate the contract after the risk has passed to the buyer, it has
been held that the risk rules implicit in the Convention's provisions on the effects of
avoidance of contract (Section V of Part III, Chapter V, articles 81 through 84), including
the rules with respect to restitution following avoidance, supersede the risk provisions of
Chapter IV.[25] When the goods are returned following termination of the contract, the
obligations of the parties should mirror the obligations of the parties in the performance of
the terminated contract: if the seller agreed to deliver goods "ex factory", then when goods
are returned following termination the risk passes to the seller when the buyer hands over
the goods to a carrier at the buyer's place of business.[26] It has also been held that, where
the seller was responsible for carriage of the goods, the principle of article 31(c)determined
when risk of loss passed back to the seller for non-conforming goods that the buyer was
(with the agreement of the seller) returning to the seller; thus risk returned to the seller when
the buyer placed the goods at the seller's disposal, properly packaged for shipment, at the
buyer's place of business.[27]

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